Severance is compensation given by an employer to an employee with tenure when circumstances such as downsizing cause the employee to lose his job. Not mandatory by law, severance is typically a matter of agreement between employer and employee, and no set rules exist. As an easy guideline, the U.S. Department of Personnel Management provides a simple formula for calculating weeks of severance.

Start with an employee's basic weekly pay.

Figure weeks of severance for employees with less than ten years of service by multiplying the basic weekly pay by the number of service years up to ten years. For example, an eight-year employee with a weekly pay of $300 will receive eight weeks as severance, or $2,400. For employees with over ten years of service, this total is a starting point before the next step.

Figure weeks of severance for employees with over ten years of service by calculating severance up to ten years and then adding two weeks of basic pay for each year beyond ten years. For example, a 13-year employee with a weekly pay of $300 would receive 10 weeks for the first 10 years, and two weeks for each of the other three years, for 16 weeks of severance, or $4,800.

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